How’s Your Healthcare Business Going?

One of the truths that’s sometimes hard to get across to people is the fact that many companies are, in fact, running healthcare businesses.

For most companies, healthcare is the second largest expense after payroll. That’s not a surprise with most corporations accepting skyrocketing healthcare costs as a fact of life.

So, in essence, there are a number of companies you know and love who spend more on healthcare than the product for which they’re famous.

Consider this:

Warren Buffett is famously quoted as saying, “GM is a health and benefits company with an auto company attached.” Indeed, according to an article in the Washington Post, General Motors’ healthcare expenditures equated to more than $1,500 a car–more than the price of steel per vehicle–and that was in 2005! (read more here and here)

And this’ll perk you up, too:

With figures from 2011, Starbucks spent an average of $2.38 per pound for coffee, and in that year, they purchased 428 million pounds of coffee. That ends up meaning they spent more than a billion dollars on coffee beans that year.

That may sound like a lot, but it’s not even their biggest expense. While it’s tough to find an exact expenditure, it’s pretty well known that Starbucks spends more on health benefits for its employees (20 hours or more a week) than it does for its billion dollars in coffee beans.

Don’t worry about them, though: in 2010, they made more than $10 billion in revenues.

So, for a major vehicle manufacturer and the largest coffee shop in the world, they are more in the healthcare business than they are in their particular product fields.

Plenty of companies in the U.S. are unwitting healthcare businesses, too. If it’s your company, there’s an obvious next question:

How’s your healthcare business doing?

So, how’s your healthcare business doing? That’s the first question the COO of a large private equity fund’s health care benefits purchasing group asks when he sits down with the CEO of a newly acquired company, say a manufacturer. Naturally, the CEO will look puzzled. The COO will then show that the company has, for example, 4,200 members enrolled in their health plan and spends the typical $10,000 per year per member for health care. He then asks “How’s your $42 million health care business?” That’s when the light bulb goes on, said the COO.

It goes on because all of the sudden, it’s clear to that COO: His company isn’t paying attention to eliminating waste, increasing efficiency, cutting costs and all the other disciplines the company reserves for its main product.

While GM may try to find the least expensive steel, or Starbucks may try to streamline its packaging systems, neither one may be paying as much attention to trimming the fat, if you will, to healthcare costs–which are a bigger piece of their overall financial picture!

Plenty of companies take the stance of healthcare fatalism, believing that costs are what they are, and the healthcare system is what it is.

But it shouldn’t be that way–and it doesn’t have to be that way.

Let Captiva Benefit Solutions help your company take back its bargaining power, strengthen its ability to shop around, and find ways to provide better healthcare for less money. Using proven strategies found in Dave Chase’s book and the Health Rosetta community, you can run your “healthcare business” as shrewedly as you do your actual business.